Eskom to Issue $2.3 Billion Tenders for Three New South African Power Stations

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Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Tenders for the first of three new power stations will be issued by the end of this year by the South African government and Eskom (Johannesburg, South Africa), the largest power utility in Africa. All three new power stations will be constructed before 2010, the minerals and energy deputy minister, Lulu Xingwana said at the end of May. When completed, the three units will add a total of about 1,000 MW to South Africa’s generating capacity.

The issuing of the tenders will be scene as an opportunity to get in on the ground floor for power equipment suppliers and construction companies who have been waiting for some time for Eskom to show tangible signs of its vaunted privatization programme. The current pan is for 30% of Eskom’s generating capacity to be held by the private sector and of this segment at least 10% will be earmarked for black economic empowerment partners.

Foreign direct investment (FDI) in the three power stations is estimated to be approximately $2.3 billion. Eskom said in April that South Africa needed $7.7 billion in power generation and power transmission investment over the next five years. Eskom currently produces 97% of the country’s power and with a total capacity of around 38,000 MW the privatized portion would come in under 4,000 MW at current levels. Planning activity at the regulatory level could see the privatization targets rise in the future if experiences are positive in terms of development and security of supply.

Eskom has forecast that South Africa’s power demand would rise by between 4.5% and 5% in 2004. The utility is investing in new transmission lines and is bringing back into operation three coal-fired, mothballed power stations with a joint capacity of 3,500 MW by the end 2005 to avoid power shortages in 2007. As one of the underpinning strengths of South Africa’s developing economy is cheap electricity, the authorities see avoiding power supply bottlenecking as a priority. Over 90% of current power generation is coal-fired with the nuclear power station at Koeberg, near Cape Town providing 1,800 MW or around 5% of the total. The country is rich in coal and coal technology and coal-fired Majuba power station in the northeast puts out 4,110 MW. Eskom has plans to increase its hydropower component and use LNG as a feedstock in a joint venture with Shell.

Minister Xingwana said that contracts with a value of $30 million would be awarded to black owned small and medium enterprises for nongrid electrification in the current financial year. She said that the backlog in the electrification of South African households was three million, and in 2003, 280,000 connections were made. This year, the accent is on the provision of bulk infrastructure. $185 million will be spent in 2004 on the infrastructure of the Eastern Cape, Kwazulu-Natal, and Limpopo provinces where the backlog is greatest.

Eskom is also directly involved in power projects that supply 50% of the African continent’s power needs and continues to wait for final resolution of decisions around the nuclear pebble bed reactor project.

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